NBA commissioner David Stern is putting the screws to Seattle
in his attempts to get the community to provide taxpayer subsidies that
are lucrative enough to keep the team from departing the "Emerald City"
to even greener fields in Oklahoma.

Stern blasts city officials
and the overwhelming majority of voters in the city for passing a law
requiring (gasp!) that any funds used to help build an arena earn the
same rate of return as a treasury bill. "That measure simply means
there is no way city money would ever be used on an arena project,"
Stern said. Effectively, Stern has just confirmed what sports
economists have known all along: taxpayer spending on sports
infrastructure is unlikely to provide significant returns on the
investment.

We went through the exact same thing here in Phoenix, with various outsiders and city politicians chiding the voters to voting down taxpayer funded palaces for the Cardinals and Coyotes (eventually, they found a sucker in the local city of Glendale). In the past, I have written about sports team and corporate relocations as a prisoners dilemma game.

To see this clearer, lets take the example of Major League Baseball
(MLB). We all know that cities and states have been massively
subsidizing new baseball stadiums for billionaire team owners. Lets
for a minute say this never happened - that somehow, the mayors of the
50 largest cities got together in 1960 and made a no-stadium-subsidy
pledge. First, would MLB still exist? Sure! Teams like the Giants
have proven that baseball can work financially in a private park, and
baseball thrived for years with private parks. OK, would baseball be
in the same cities? Well, without subsidies, baseball would be in the
largest cities, like New York and LA and Chicago, which is exactly
where they are now. The odd city here or there might be different,
e.g. Tampa Bay might never have gotten a team, but that would in
retrospect have been a good thing.

The net effect in baseball is the same as it is in every other
industry: Relocation subsidies, when everyone is playing the game, do
nothing to substantially affect the location of jobs and businesses,
but rather just transfer taxpayer money to business owners and workers.

Indeed this is a classic example of the time inconsistency problem for
which Finn Kydland and Ed Prescott (my graduate school macro
professor!) won the Nobel Prize in 2004. Stern would like to threaten
Seattle with the permanent loss of their NBA team in order to secure
taxpayer concessions now. But should the team move, the NBA has every
reason to want to back off its previous threats and relocate a team
back into to the area due to the size, location, and income levels of
the city. Even having lost a team, Seattle will likely remain a better
candidate for a successful franchise than smaller and poorer cities
such as New Orleans or Memphis. Certainly Seattle should not fall for
Stern's bluster.